March 29th, 2008 | 
Author: 
Erik Salmon asked:
1. Business Bank Loans.
This type of funding for your business will require you to provide a lot of documentation. Each bank has its own lending criteria but most of them ask for much of the same type of documentation according to how much money is being applied for as well as they type of loan.
At a minimum you should have a basic finical pack prepared. You will have to check with each bank and find out what documentation is needed to complete the loan process. But in most cases a good FICO score of at least 680 or better will be needed to obtain the loan. Using personal property personally as collateral can help to obtain larger loan amounts or even increase the likelihood of approval.
If your company is seeking a 6 figures plus loan, the bank will be considering the 5 C’s of credit in determining credit worthiness. So be prepared to demonstrate that your company is viewed in a positive light when it comes to the 5 C’s of credit which are as follows:
1. Character: The bank assesses the trustworthiness of candidates for character. Factors of character criteria are: business experience and knowledge, personal and/or small business credit history, references, and education.
2. Capacity: The business and individuals ability to pay back the small business credit determines capacity. Bankers will review the cash flow of the business (profit and loss statement and other financial statements) to determine alternative courses of repayment available.
3. Collateral: To reduce the risk of lending, collateral in various forms of assets is another method of repayment. Collateral would include: equipment, real estate, inventory, account receivables, and securities. A personal guarantee (signed document) can be required as an additional reassurance of repayment. Obtaining small business credit and providing guarantees may seem troubling, but the bank really does not want to exercise its position on seizing and liquidating assets. In most cases, the banker will work diligently to find payment solutions.
4. Conditions: This is a review of the small business credit or loan conditions in terms of use for expansion or buying equipment. This also applies to the external environment that impact a companies ability for repayment such as: customer base, competitors, liabilities, and economics.
5. Capital: A business owners investment into their own company sends a message of confidence about the business and the ability to repay the small business line of credit or loan. Net-worth and equity are the two key financials used. Ultimately, a business owner unwilling to invest their own funds in the company will often find banks are unwilling to take the first risk.
Update for 2008
Due to the event of 9-11 as well as the recent sub-prime lending banks closing their doors, most banks have changed their lending policies and tightened their lending criteria. Do not be surprised if you find that a bank still asks for a personal guarantee even if the loan is secured by a CD (certificate of deposit) or an asset such as real estate.
The basics of business loans
Business loans typically come in three primary forms.
Short-term business loans provide capital for a business in need of money to start up operations. Typically these are 12 month or shorter loans.
Intermediate term loans can help start-up businesses pay for equipment and cover large initial expenses. Such loans are usually for anywhere from one to three years.
Long-term loans are typically used to help start-up businesses with initial costs such as buying office equipment, furniture fixtures and commercial mortgages. These types of loan are usually from three to seven years and repayments are made in installments.
Before approaching a lender it is important that you have a clear understanding of what the loan will be used for and how you can best present this information. It is equally important that you have a realistic plan for repaying the loan. After all being able to show the lender that there is sufficient cash flow in your business to service the loan or even being able to show a history of successfully servicing a similar size loan will go along way to getting approved for the loan.
When working on a loan request, you want to include the following, some of which will likely be included in your business plan.
2. Be Prepared.
Be specific about the purpose of the loan.
In your presentation or loan request you will need to address the following:
o Specifically how much money will be needed.
o A management profile.
o An overview of the market including your projected customer base and competition.
o Personal and business financial statements and if possible, collateral that can secure the loan.
Typically, the lenders will want to see that the business owner has contributed financially to the business venture. After all if the owner does not want to risk any money then why should the lenders. The lenders may also want to see what other types of financing the business has obtained if it is a large sum of money being sought.
Common supporting documentation the lenders will ask for but not limited to are:
o Incorporation or LLC organizational documents.
o Proof of ownership or sale, if you purchased the business.
o Material contracts.
o Letters of reference.
o Financial statements including personal tax returns for the last three to five years, a list of assets and liabilities and even credit references.
o Business tax returns.
Being awarded a business loan will depend on the lenders criteria and expectations the lender may have. You will often find that one lender will say no and another will say yes after reviewing the same loan request and supporting documentation. Do not give up and try to learn from each loan process.
Once you have been approved for a loan, you need to work with the lender to obtain terms that you feel comfortable with and line up with your projected cash flow. Also be prepared to negotiate the interest rate. State law may dictate a minimum rate but anything above that is negotiate able.
You will also want to know what fees are included some of these fees are common and some you can negotiate or get waived.
3. Getting Approved For a Small Business Loan.
One of the most common reasons business fail in the first year is lack of sufficient start-up capital. Most banks will not even loan money to a business unless it has been operating for at least 2-5 years. 95% of start-up businesses start with the owners own money and money from friends and relatives. The key is staying persistent and not giving up.
What will be the biggest determining factor that banks look at is a companies ability to repay. Just like other businesses, banks must answer to investors and stockholders. And unpaid loans make them look bad.
The most common questions a bank will ask are:
o How much money does the business want?
o Is the business profitable enough, and does it have enough cash flow, to service the debt?
o Has the business services this much debt successfully in the past?
o Does the business have collateral to cover the loan?
o Is there a reasonable balance between debt and equity?
o Banks also want and expect business owners to risk their own funds in the business. Why should they risk money if the business owner has not risked their own money?
The types of businesses most likely to receive loans are those with a history of success in paying their bills, demonstrating their ability to meet financial obligations.
A bank will also check, and double-check, a business credit history. Having your business credit profile properly setup and having good personal credit will go a long way in helping the bank say yes.
4. Increasing Your Chances of Getting Approved
There are a number of things you can do to improve your chances of securing a bank loan. Here are a few of the most important:
A sound business plan.
Having a solid business plan is your best shot at getting a loan. The executive summery is the most important part of your plan as this is what the lender will look at first. If they like what they see they will read on.
Having at least a 25% equity stake in the business.
Banks and lenders like to see that the owner of the business has a financial stake in the business. If the owner is not willing to have skin in the game sort of speak they why should the lender risk their money.
Good personal credit.
Having good personal credit will help to reduce the interest rate you will be charged and also show the lender that you are a good risk. If you do have some negative marks one your credit, submit a letter to the lender explaining the circumstances and how these circumstances have changed. This will help to soften the blow of the negative mark such as bankruptcy. It also shows that you are not trying to hid anything and can be trusted to be honest.
Apply For Small Business Loans
1. Business Bank Loans.
This type of funding for your business will require you to provide a lot of documentation. Each bank has its own lending criteria but most of them ask for much of the same type of documentation according to how much money is being applied for as well as they type of loan.
At a minimum you should have a basic finical pack prepared. You will have to check with each bank and find out what documentation is needed to complete the loan process. But in most cases a good FICO score of at least 680 or better will be needed to obtain the loan. Using personal property personally as collateral can help to obtain larger loan amounts or even increase the likelihood of approval.
If your company is seeking a 6 figures plus loan, the bank will be considering the 5 C’s of credit in determining credit worthiness. So be prepared to demonstrate that your company is viewed in a positive light when it comes to the 5 C’s of credit which are as follows:
1. Character: The bank assesses the trustworthiness of candidates for character. Factors of character criteria are: business experience and knowledge, personal and/or small business credit history, references, and education.
2. Capacity: The business and individuals ability to pay back the small business credit determines capacity. Bankers will review the cash flow of the business (profit and loss statement and other financial statements) to determine alternative courses of repayment available.
3. Collateral: To reduce the risk of lending, collateral in various forms of assets is another method of repayment. Collateral would include: equipment, real estate, inventory, account receivables, and securities. A personal guarantee (signed document) can be required as an additional reassurance of repayment. Obtaining small business credit and providing guarantees may seem troubling, but the bank really does not want to exercise its position on seizing and liquidating assets. In most cases, the banker will work diligently to find payment solutions.
4. Conditions: This is a review of the small business credit or loan conditions in terms of use for expansion or buying equipment. This also applies to the external environment that impact a companies ability for repayment such as: customer base, competitors, liabilities, and economics.
5. Capital: A business owners investment into their own company sends a message of confidence about the business and the ability to repay the small business line of credit or loan. Net-worth and equity are the two key financials used. Ultimately, a business owner unwilling to invest their own funds in the company will often find banks are unwilling to take the first risk.
Update for 2008
Due to the event of 9-11 as well as the recent sub-prime lending banks closing their doors, most banks have changed their lending policies and tightened their lending criteria. Do not be surprised if you find that a bank still asks for a personal guarantee even if the loan is secured by a CD (certificate of deposit) or an asset such as real estate.
The basics of business loans
Business loans typically come in three primary forms.
Short-term business loans provide capital for a business in need of money to start up operations. Typically these are 12 month or shorter loans.
Intermediate term loans can help start-up businesses pay for equipment and cover large initial expenses. Such loans are usually for anywhere from one to three years.
Long-term loans are typically used to help start-up businesses with initial costs such as buying office equipment, furniture fixtures and commercial mortgages. These types of loan are usually from three to seven years and repayments are made in installments.
Before approaching a lender it is important that you have a clear understanding of what the loan will be used for and how you can best present this information. It is equally important that you have a realistic plan for repaying the loan. After all being able to show the lender that there is sufficient cash flow in your business to service the loan or even being able to show a history of successfully servicing a similar size loan will go along way to getting approved for the loan.
When working on a loan request, you want to include the following, some of which will likely be included in your business plan.
2. Be Prepared.
Be specific about the purpose of the loan.
In your presentation or loan request you will need to address the following:
o Specifically how much money will be needed.
o A management profile.
o An overview of the market including your projected customer base and competition.
o Personal and business financial statements and if possible, collateral that can secure the loan.
Typically, the lenders will want to see that the business owner has contributed financially to the business venture. After all if the owner does not want to risk any money then why should the lenders. The lenders may also want to see what other types of financing the business has obtained if it is a large sum of money being sought.
Common supporting documentation the lenders will ask for but not limited to are:
o Incorporation or LLC organizational documents.
o Proof of ownership or sale, if you purchased the business.
o Material contracts.
o Letters of reference.
o Financial statements including personal tax returns for the last three to five years, a list of assets and liabilities and even credit references.
o Business tax returns.
Being awarded a business loan will depend on the lenders criteria and expectations the lender may have. You will often find that one lender will say no and another will say yes after reviewing the same loan request and supporting documentation. Do not give up and try to learn from each loan process.
Once you have been approved for a loan, you need to work with the lender to obtain terms that you feel comfortable with and line up with your projected cash flow. Also be prepared to negotiate the interest rate. State law may dictate a minimum rate but anything above that is negotiate able.
You will also want to know what fees are included some of these fees are common and some you can negotiate or get waived.
3. Getting Approved For a Small Business Loan.
One of the most common reasons business fail in the first year is lack of sufficient start-up capital. Most banks will not even loan money to a business unless it has been operating for at least 2-5 years. 95% of start-up businesses start with the owners own money and money from friends and relatives. The key is staying persistent and not giving up.
What will be the biggest determining factor that banks look at is a companies ability to repay. Just like other businesses, banks must answer to investors and stockholders. And unpaid loans make them look bad.
The most common questions a bank will ask are:
o How much money does the business want?
o Is the business profitable enough, and does it have enough cash flow, to service the debt?
o Has the business services this much debt successfully in the past?
o Does the business have collateral to cover the loan?
o Is there a reasonable balance between debt and equity?
o Banks also want and expect business owners to risk their own funds in the business. Why should they risk money if the business owner has not risked their own money?
The types of businesses most likely to receive loans are those with a history of success in paying their bills, demonstrating their ability to meet financial obligations.
A bank will also check, and double-check, a business credit history. Having your business credit profile properly setup and having good personal credit will go a long way in helping the bank say yes.
4. Increasing Your Chances of Getting Approved
There are a number of things you can do to improve your chances of securing a bank loan. Here are a few of the most important:
A sound business plan.
Having a solid business plan is your best shot at getting a loan. The executive summery is the most important part of your plan as this is what the lender will look at first. If they like what they see they will read on.
Having at least a 25% equity stake in the business.
Banks and lenders like to see that the owner of the business has a financial stake in the business. If the owner is not willing to have skin in the game sort of speak they why should the lender risk their money.
Good personal credit.
Having good personal credit will help to reduce the interest rate you will be charged and also show the lender that you are a good risk. If you do have some negative marks one your credit, submit a letter to the lender explaining the circumstances and how these circumstances have changed. This will help to soften the blow of the negative mark such as bankruptcy. It also shows that you are not trying to hid anything and can be trusted to be honest.
Apply For Small Business Loans
About Wade Henderson
Wade Henderson: Domestic and International Business Finance since 1995 specializing in challenge situations. "We prefer to find a way to get your loan done as opposed to finding a reason to turn it down.” Connect with me on Google+
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